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In re Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation

United States District Court, N.D. California

May 17, 2017



          CHARLES R. BREYER United States District Judge.

         In the fall of 2015, the public learned of Volkswagen's deliberate use of a defeat device- software designed to cheat emissions tests and deceive federal and state regulators-in nearly 600, 000 Volkswagen-, Porsche-, and Audi-branded turbocharged direct injection (“TDI”) diesel engine vehicles sold in the United States. Litigation quickly ensued, and those actions were consolidated and assigned to this Court as a multidistrict litigation (“MDL”). After months of intensive negotiations and with the assistance of a court-appointed settlement master, Plaintiffs and Defendants Robert Bosch GmbH and Robert Bosch, LLC (collectively, “Bosch”) reached a settlement that resolves consumer claims concerning affected 2.0- and 3.0-liter diesel TDI vehicles. (See Dkt. No. 2918.) The Court preliminarily approved the Settlement on February 16, 2017. (See Dkt. No. 2920.)

         The Settlement Class Representatives now move for final approval of the Settlement. (Dkt. No. 3086.) On May 11, 2017, the Court held a fairness hearing regarding final approval, during which the attorney for one Class Member addressed the Court. Having considered the parties' submissions and with the benefit of oral argument, the Court GRANTS final approval of the Settlement. The Settlement is fair, reasonable, and adequate.


         I. Factual Allegations

         From 2009 through 2015, Volkswagen sold Volkswagen-, Audi-, and Porsche-branded TDI “clean diesel” vehicles, which it marketed as being environmentally friendly, fuel efficient, and high performing. Unbeknownst to consumers and regulatory authorities, Volkswagen installed in these cars a software defeat device that allowed the vehicles to evade United States Environmental Protection Agency (“EPA”) and California Air Resources Board (“CARB”) emissions test procedures. Specifically, the defeat device senses whether the vehicle is undergoing testing and produces regulation-compliant results, but operates a less effective emissions control system when the vehicle is driven under normal circumstances. Only by installing the defeat device on its vehicles was Volkswagen able to obtain Certificates of Conformity from EPA and Executive Orders from CARB for its 2.0- and 3.0-liter diesel engine vehicles; in fact, these vehicles release nitrogen oxides at a factor of up to 40 times over the permitted limit. Over six years, Volkswagen sold American consumers nearly 600, 000 diesel vehicles equipped with a defeat device.

         As alleged, Bosch worked closely with Volkswagen to develop and supply the defeat device for use in Volkswagen's vehicles. Despite having knowledge of Volkswagen's illicit use of the defeat device, Bosch continued to work with Volkswagen and even concealed the defeat device in communications with U.S. regulators when concerns were raised about the emission control systems in certain Volkswagen vehicles. While Volkswagen has publicly admitted wrongdoing, Bosch continues to deny wrongdoing. (See Dkt. No. 2838 at 8.)

         II. Procedural History

         In January 2016, the Court appointed Elizabeth J. Cabraser of Lieff, Cabraser, Heimann & Bernstein, LLP as Lead Plaintiffs' Counsel and Chair of the Plaintiffs' Steering Committee (“PSC”), to which the Court also named 21 other attorneys. (Dkt. No. 1084.) On September 2, 2016, the PSC filed its Amended Consolidated Consumer Class Action Complaint against 13 named defendants: Volkswagen Group of America; Volkswagen AG; Audi AG; Audi of America, LLC; Porsche AG; Porsche Cars North America, Inc.; Martin Winterkorn; Mattias Müller; Michael Horn; Rupert Stadler; Robert Bosch GmbH; Robert Bosch, LLC; and Volkmar Denner. (Dkt. No. 1804.) As against Bosch, the complaint asserts claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c)-(d), state fraud and unjust enrichment laws, and all fifty States' consumer protection laws. The PSC also filed a Second Amended Consolidated Reseller Dealership Class Action Complaint against the same 13 defendants; the complaint asserts against Bosch claims for RICO, fraud, and unjust enrichment. (Dkt. No. 1805.)

         In January 2016, the Court appointed former Director of the Federal Bureau of Investigation Robert S. Mueller III as Settlement Master to oversee settlement negotiations between the parties. (Dkt. No. 973.) Since that time, in parallel to negotiations for the 2.0-liter and 3.0-liter Volkswagen settlements, the parties have engaged in both litigation and settlement discussions over Bosch's involvement in the Volkswagen emissions scandal. The parties finally reached a proposed Settlement, and the Court preliminarily approved the Settlement on February 16, 2017. (Dkt. No. 2920.)

         The Notice Administrator implemented the court-approved Notice Program beginning March 6, 2017 by U.S. first class mail. (Dkt. No.3188-2 ¶ 18.) Plaintiffs filed a motion for final approval on March 24, 2017. (Dkt. No. 3086.) By April 14, 2017, there were four timely objections and 640 opt outs. (Dkt. Nos. 3188 at 5; 3188-1 at 3-15; 2188-2 ¶¶ 43-44.)


         The key provisions of the Settlement are as follows. The Settlement requires Bosch to create a non-reversionary settlement fund, called the Bosch Settlement Fund, in the amount of $327, 500, 000 to compensate Class Members. (Dkt. No. 2918 ¶¶ 4.1, 10.1.)

         The proposed Settlement Class consists of all persons and entities who were eligible for membership in the combination of classes defined in the 2.0-liter and 3.0-liter class action settlement agreements, including anyone who opted out or opts out of those agreements. (Id. ¶ 2.17.) The following are excluded from the Settlement Class: (a) Bosch's officers, directors, and employees; and Bosch's affiliates and affiliates' officers, directors, and employees; (b) Volkswagen; Volkswagen's officers, directors, and employees; and Volkswagen's affiliates and affiliates' officers, directors, and employees; (c) any Volkswagen franchise dealer; (d) judicial officers and their immediate family members and associated court staff assigned to this case; and (e) any person or entity that timely and properly opted out of the Bosch Settlement. (Id.) Eligible Vehicles under the Settlement are the same eligible vehicles identified in the 2.0-liter and 3.0-liter settlement agreements. (Id. ¶ 2.34.) Any Volkswagen, Audi, or Porsche vehicles that were never sold in the United States or its territories are excluded from the Eligible Vehicles. (Id.)

         The Bosch Settlement Fund will be distributed such that $163, 267, 450 will be shared among 2.0-liter Class Members and $113, 264, 400 will be shared among 3.0-liter Class Members. (Dkt. No. 2838 at 14.) The Fund will be distributed to Class Members, based on the Federal Trade Commission's (“FTC”) allocation plan (see Dkt. No. 2918 ¶ 4.4), as follows:

         An eligible owner of an Eligible Vehicle in the 2.0-liter settlement will receive $350, except that if an eligible seller or lessee has an approved claim for the same Eligible Vehicle, the eligible owner will receive $175. (Dkt. No. 2838 at 15.) An eligible seller in the 2.0-liter settlement with an approved claim will receive $175. (Id.) An eligible lessee in the 2.0-liter settlement will receive $200. (Id.)

         An eligible owner of an Eligible Vehicle in the 3.0-liter settlement will receive $1, 500, with three exceptions: (1) if an eligible former owner of the same Eligible Vehicle has an approved claim in the 3.0-liter settlement, the $1, 500 payment will be split equally ($750 each) between the owner and the former owner; (2) an eligible owner will also receive $750 if an eligible former lessee of the Eligible Vehicle has an approved claim; and (3) if two former eligible owners of the Eligible Vehicle have approved claims, the $1, 500 will be split such that the eligible owner receives $750 and each of the two former owners receives $375. (Id.) An eligible lessee in the 3.0-liter settlement will receive $1, 200. (Id.) The Settlement Benefit Period, or the time period during which Class Members may obtain benefits under the Settlement, ends on April 30, 2020. (Id. ¶ 2.50.)

         At the conclusion of the Settlement Benefit Period, if any funds remain in the Bosch Settlement Fund, and it is not feasible or economically reasonable to distribute such funds to Class Members, the funds will be distributed through cy pres payments according to a distribution plan and schedule filed by Class Counsel and approved by the Court. (Id. ¶ 10.2.) Any unused funds will only revert to Bosch if the Settlement is terminated or invalidated prior to the conclusion of the Settlement Benefit Period. (Id. ¶ 10.3.)

         Reasonable attorneys' fees and costs for common-benefit work performed by Class Counsel, and other attorneys designated by Class Counsel, will be paid from the Bosch Settlement Fund. (Id. ¶ 11.1.) Bosch and Class Counsel did not discuss the amount of fees and expenses to be paid prior to agreement on the terms of the Settlement (id.), though with Class Counsel's request for preliminary approval of the Settlement, Class Counsel indicated that it would seek attorneys' fees of no more than 16 percent of the Bosch Settlement Fund (Dkt. No. 2838 at 16). With Class Counsel's request for final approval of the Settlement, Class Counsel moved for $51 million in attorneys' fees and $1 million in costs and expenses, amounting to 15.6% of the Bosch Settlement Fund. (Dkt. No. 3087 at 5.) In a separate order issued today, the Court granted Class Counsel's request. (Dkt. No. 3231.)

         In exchange for benefits under the Settlement, Class Members agree to release all Released Claims against the Released Parties. The Settlement defines Released Parties as:

(1) Robert Bosch GmbH, Robert Bosch LLC, and all current and former parents (direct or indirect), shareholders (direct or indirect), members (direct or indirect), subsidiaries, affiliates, joint venture partners, insurers, contractors, consultants, and auditors, and the predecessors, successors, and assigns of the foregoing (the “Bosch Released Entities”); and (2) all current and former officers, directors, members of the management or supervisory boards, employees, agents, advisors and attorneys of the Bosch Released Entities (the “Bosch Released Personnel”).

(Dkt. No. 2918 ¶ 9.2.)

         The Released Claims are defined as:

any and all claims, demands, actions, or causes of action, whether known or unknown, that they may have, purport to have, or may have hereafter against any Released Party, as defined above, that: (i) are related to any Eligible Vehicle; (ii) arise from or in any way relate to the 2.0-liter TDI Matter or the 3.0 Liter TDI Matter; and (iii) that arise from or are otherwise related to conduct by a Released Party that (a) predates the date of this Class Action Settlement Agreement and (b) formed the factual basis for a claim that was made or could have been made in the Complaints. This Release applies to any and all claims, demands, actions, or causes of action of any kind or nature whatsoever, whether in law or in equity, contractual, quasi-contractual, or statutory, known or unknown, direct, indirect or consequential, liquidated or unliquidated, past, present or future, foreseen or unforeseen, developed or undeveloped, contingent or non-contingent, suspected or unsuspected, whether or not concealed or hidden, related to any Eligible Vehicle and arising from or otherwise related to conduct by a Released Party that predates the date of this Class Action Settlement Agreement as set forth above, including without limitation (1) any claims that were or could have been asserted in the Action; (2) all marketing and advertising claims related to Eligible Vehicles; (3) all claims arising out of or in any way related to emissions, emissions control equipment, electronic control units, electronic transmission units, CAN-bus-related hardware, or software programs, programing, coding, or calibration in Eligible Vehicles; (4) all claims arising out of or in any way related to a 2.0-liter TDI Matter under the 2.0-liter Class Action Settlement and a 3.0-liter TDI Matter under the 3.0-liter Class Action Settlement; and (5) any claims for fines, penalties, criminal assessments, economic damages, punitive damages, exemplary damages, statutory damages or civil penalties, liens, rescission or equitable or injunctive relief, attorneys', expert, consultant, or other litigation fees, costs, or expenses, or any other liabilities, that were or could have been asserted in any civil, criminal, administrative, or other proceeding, including arbitration[.]

(Id. ¶ 9.3.)


         I. Legal Standard

         The Ninth Circuit maintains “a strong judicial policy” that favors class action settlements. Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015). Nevertheless, Federal Rule of Civil Procedure 23(e) requires courts to approve any class action settlement. “[S]ettlement class actions present unique due process concerns for absent class members.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). As a result, “the district court has a fiduciary duty to look after the interests of those absent class members.” Allen, 787 F.3d at 1223 (collecting cases). Specifically, courts must “determine whether a proposed settlement is fundamentally fair, adequate, and reasonable.” Hanlon, 150 F.3d at 1026; see Fed. R. Civ. P. 23(e)(2). In particular, where “the parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003).

         Approval of a settlement is a two-step process. Courts first “determine[] whether a proposed class action settlement deserves preliminary approval and then, after notice is given to class members, whether final approval is warranted.” In re High-Tech Employee Antitrust Litig., No. 11-CV-02509-LHK, 2014 WL 3917126, at *3 (N.D. Cal. Aug. 8, 2014). “At the fairness hearing, . . . after notice is given to putative class members, the court entertains any of their objections to (1) the treatment of the litigation as a class action and/or (2) the terms of the settlement.” Ontiveros v. Zamora, 303 F.R.D. 356, 363 (E.D. Cal. 2014) (citing Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989)). After the fairness hearing, the court determines whether the parties should be allowed to settle the class action pursuant to the agreed-upon terms. See Chavez v. Lumber Liquidators, Inc., No. CV-09-4812 SC, 2015 WL 2174168, at *3 (N.D. Cal. May 8, 2015) (citation omitted).

         II. Final Certification of the Settlement Class

         A. Rule 23(a) and (b) Requirements

         A class action is maintainable only if it meets the four Rule 23(a) prerequisites:

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a). In a settlement-only certification context, the “specifications of the Rule . . . designed to protect absentees by blocking unwarranted or overbroad class definitions . . . demand undiluted, even heightened, attention[.]” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997). “Such attention is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.” Id.

         In addition to the Rule 23(a) prerequisites, “parties seeking class certification must show that the action is maintainable under Rule 23(b)(1), (2), or (3).” Amchem, 521 U.S. at 614. Rule 23(b)(3), relevant here, requires that (1) “questions of law or fact common to class members predominate over any questions affecting only individual members” and (2) “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3). The “pertinent” matters to these findings include:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the ...

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